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Reputation on a credence good market: an economic analysis of professional self-regulation

Author

Listed:
  • Camille Chaserant

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Sophie Harnay

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

This article provides a rationalization of (at least partial) professional self-regulation resting on the joint production of individual and collective reputations and its impact on the quality of professional services. It presents a short model that aims to show that (i) a high-quality steady-state exists in a market for a credence goods and that (ii) the likelihood of high quality increases when the market is self-regulated by the profession in comparison to the situation where there is no self-regulation. The law and economics literature usually criticizes self-regulation as a modern form of corporatism; we show that it may help to regulate quality when clients are faced with opportunistic professionals.

Suggested Citation

  • Camille Chaserant & Sophie Harnay, 2011. "Reputation on a credence good market: an economic analysis of professional self-regulation," Working Papers hal-04140950, HAL.
    • Handle: RePEc:hal:wpaper:hal-04140950
    Note: View the original document on HAL open archive server: https://hal.science/hal-04140950
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    References listed on IDEAS

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    3. James C. Miller III, 1985. "The FTC and Voluntary Standards: Maximizing the Net Benefits of Self-Regulation," Cato Journal, Cato Journal, Cato Institute, vol. 4(3), pages 897-903, Winter.
    4. Jean Tirole, 1996. "A Theory of Collective Reputations (with applications to the persistence of corruption and to firm quality)," Review of Economic Studies, Oxford University Press, vol. 63(1), pages 1-22.
    5. Van Den Bergh, Roger & Faure, Michael, 1991. "Self-regulation of the professions in Belgium," International Review of Law and Economics, Elsevier, vol. 11(2), pages 165-182, September.
    6. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
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